Careful What You Ask For: China's Patent System Causing Trouble

from the and-now-you've-got-it dept

We've been running Kevin's excellent series of posts on the push to put in place stronger patent and copyright laws in China and India, showing why that's probably shortsighted and likely will do more harm than good. China's example is instructive. There's been this big push to get China to "respect intellectual property," based on the slightly misleading claim that China is all about infringement (of both copyrights and patents). China only first got its patent system in the mid-1980s (due to much outside pressure) and didn't take it very seriously for a while. In the last few years, that's started to change (again, in large part due to outside pressure, but now combined with pressure from companies inside the country trying to block out competitors).

However, you should be careful what you wish for. Companies are now discovering that, just as in other countries, the patent system in China can and will be used to block out competition, rather than encourage innovation. France's Schneider Electric just learned that the hard way, after losing a patent infringement lawsuit in China and being ordered to pay $23 million for infringing on a Chinese company's patents. The problem? Schneider had tons of prior art to show that the patent by the Chinese firm, Chint, was hardly new or innovative. But, the Chinese courts ruled that it didn't really matter. That's because this was a utility patent (rather than an invention or a design patent) -- which based on the Chinese law requires almost no investigation into whether or not its new or obvious. Plus it's cheap. $70 and its yours. Basically, it's a formality system, rather than a true patent examination.

All those foreign nations who kept pushing China to build up its own patent system and learn to "respect intellectual property" may soon be regretting that, as they're suddenly blocked out of the Chinese market by Chinese firms who fast-tracked cheap utility patents themselves with little to no review. Be careful what you wish for.

Re: China 1, Foreigners 0

Re: China 1, Foreigners 0

Possibly because the Chinese businesses suck in a given market. You don't think China deals with Google because they want to, do you? But of course nationalist China is not often going to just hand foreigners the legal tools to beat their own companies.

Come to think of it, the U.S. acts pretty similarly -- it's just that America is 1)more business-friendly and 2)contains a much larger percentage of existing market share in technical and manufacturing industries than others, so we're trying to maintain that. Although the U.S. (and wow, the U.K.) are doing an excellent job of driving those businesses away recently, both large and small.

Re: Re: Re: Awwwwww!

Competition != Innovation

block out competition, rather than encourage innovation

This preassumes that competition and innovation are equivalent. In fact, if competition in the marketplace encourages innovation why wouldn't competition for intellectual property also encourage innovation?

Re: Competition != Innovation

This preassumes that competition and innovation are equivalent. In fact, if competition in the marketplace encourages innovation why wouldn't competition for intellectual property also encourage innovation?

Chinese protectionism

Disclaimer: I am a Chinese from Taiwan who moved and now lives in Canada.

Well, I've known people who does business in China. The basic policy to do business there is... you have to have a Chinese partner.

No matter what business you do, if you are a foreign company and is involved in a fight with a local Chinese company, it's almost automatically you lose. There is no freakin' way you can win against a local company. And if you are in a fight with your local Chinese partner? You lose too. It's not uncommon that foreigners setup companies that later got taken over by Chinese partners forceably, without compensation. The most recent case is a big name brand chain department store that is quite established in China now, in which the foreign partners got driven out and the local Chinese partner owns everything now, without paying a cent to the foreigners.

Foreigners have this total misconception of "fair" and "openness" and "law" that they exist or should exist in China. Well, obviously you have no idea how Chinese culture works (especially in China) and surely will be in a big surprise. It's not a stereo type to say that in Asian culture, relationship is more important than anything. It's true. It's not what law/regulation you followed. It's who you know and bribed lately.

It's bully tactic. We know, they know, but what can you do about it? Nothing, because China is tightly state-controlled country. A non-Chinese is completely powerless.

Granted, it a whole freakin' lot worse about 15-20 years ago when it's even more lawless. Villages would drive out factory owners by force and take over the factory for themselves (no I am not kidding or talking about the Chinese communism revolution era. I am talking about late 1980, early 1990'ish and it happens all the time) Then Chinese government realized that no one is going to invest unless there is some kind of gaurantee to not lose your investment. Then it gets better. Then China realized that these days you HAVE to invest in China if you wish to have any growth. Guess what, it's getting worse again because WE NEED THEM more then THEY NEED US now.

Now back from the big tangent and about Copyright in China. It's not surprising that this is happening. Chinese court essential is Chinese government, and they don't really look at the facts. Even if they do they'll explain it in the way they want.

You guys want copyright? Sure, we'll do it, but it's just a show. You guys want to "enforce" copyright? Sure, we'll do it BUT in a way that much, much, MUCH more favoriable to Chinese people. What? You don't like it? Then get out.

Seriously, they do it because they can and will. It's unfortunate to inform you guys but this isn't about law. It's about government policy and attitude. The idea that we are used to, the seperation of power? It doesn't exist in China. That's really the first fact that you MUST realize when dealing with them. Government = Police = Court = all government agencies. In all sense the government is the judge, jury and executioner.

Hoping that China will adopt a US like or world standard of copyright? (HIGHLY UNLIKELY since Chinese government is VERY sensitive about foreign countrys' involvement and interfernce) They will if you pressure them enough. However, it'll just be another show only and will come back to bite whoever is pushing that in their ass. (seriously, Chinese people will revenge. Remember the deal that broke off with the Australian oil/energy company? The talk broke off because of share holders of the Australian company is concerned about Chinese government's policy and humane records. A few days later that company's employee in China got arrested for industrial espionage. If that's not obviously enough...)

re; william

thanks for the insight will, i really enjoyed reading that. It does stand to reason that China will look out for China. Too many times Americans assume that things we hold dear like "law" "just-ness" (sp?) and the like are the way things "should" be in other countries. Look at the "democracy-building" in Iraq to see how well thats been recieved by the public. They are correct in hating us.

Re: re; william

Re: Chinese protectionism

"You guys want copyright? Sure, we'll do it, but it's just a show. You guys want to "enforce" copyright? Sure, we'll do it BUT in a way that much, much, MUCH more favoriable to Chinese people. What? You don't like it? Then get out."

Yup, and if anyone pushing that on China had bothered to look at the history of copyright in... say... the US, would have realized what was about to happen.

Re: Chinese protectionism

China did something right.

They observed Russia get ruined by Harvard economists.
They observed Eastern European companies / assets get bought out by Westerners dirt cheap and sold for fortunes.
They observed American Patents being primarily enforced around the world.

Their decision? Create the system everyone pressures them to implement and manage. They realize noone can tell them how to manage it :).

Does China Really Exist?

I think this whole “China” thing is a figment of the anti-IP crowd, created purely to further their propaganda aims. Have you noticed, whenever they show pictures purporting to be “China”, the shadows never look right? It’s quite plainly all faked with Chinese actors.

Besides, how could people have gone there to colonize the place? It’s a proven fact that you have to cross the largest ocean in the world to get there from here. You have to cross the International Date Line, and the time warp produces lethal radiation hazards. Nobody could have survived the voyage, and in any case it would have taken longer than the known 6000-year-age of the Earth to get there.

History is the key to understanding.

It is my understanding that Bob Rines, inventor, Inventors Hall of Fame inductee, Patent Attorney & professor and the founder of Franklin Pierce Law School was the principle author of China’s patent system. I had a nice discussion with Bob Rines many years ago about this and the problem was and I believe still is that the Chinese have difficulty understanding intellectually property rights. It is reasonable to expect that their grasp of the concept will improve greatly as they come to understand the importance of such rights and as the see self interest. As this happens their courts will evolve and hopefully come to actually enforce equitable rule of law.

Mike, if your commentary was a bit less biased you could actually be in a position to reach out to those of us who actually know something about this business. Your writings would no doubt improve considerably. This is something which journalists do all the time. They cannot be experts on every topic and they understand this.

i must have the same problem...

...i have difficulty understanding intellectual property rights.
How does one enforce the copyright on an idea? The moment that
idea is spoken/shared/acted upon, it is un-enforcable. You are able tp protect copyright on a physical object. Not so much on an idea or concept. The Chinese might be more enlightened on the subject than we think.

Re: History is the key to understanding.

"The problem was and I believe still is that the Chinese have difficulty understanding intellectually property rights."

Only in America can someone be so ignorant, so sinfully proud, so straight up arrogant as to qualify the failure to successfully apply western legal concepts to a great (meaning large/sucessful) Eastern nation as THEY'RE difficulty in understanding. They don't have difficulty understanding, you oh so subtly insulting assclown, they don't FUCKING AGREE. And for them, IP law may not make sense. Here it might, to one degree or another. Cultures are different, and they require different rules.

"It is reasonable to expect that their grasp of the concept will improve greatly as they come to understand the importance of such rights and as the see self interest."

This is already done. That's what this article is about. They've taken the tiny bits of Western law that are being handed to them, carving out the parts that help China, taking the parts that don't, sniffing them, gently patting them....and then promptly chewing them up and shitting them back in our collective faces. As they should. They're China. Not America.

"As this happens their courts will evolve and hopefully come to actually enforce equitable rule of law."

Right. We don't have equitable international rulings here in America, but they're going to have them in fucking China. Uh huh.

"Mike, if your commentary was a bit less biased..."

Ooooooh, burn.

"you could actually be in a position to reach out to those of us who actually know something about this business."

Granted, you may know invention. You may even know a thing or two about IP law. But you, my friend, have little to no understanding of international relations, the concept of sovereignty, or cultural history.

Oh, and another thing: I'll agree to take what you say into consideration when you can figure out how to not have two retarded long signatures announcing that your speaking for yourself and not all of the millions of voices that are in your head, telling you go to the post office and just start shooting, shooting, shooting. But you have to ignore them Ronnie, ignore those voices. Because you see, violence is not the answer, and you don't need to kill postmen and citizens just because you're sure it was YOU that invented really terrible drinking songs and not those idiots Chumbawumba. IGNORE THE VOICES, RONNIE! IGNORE THEM!

Re: Re: History is the key to understanding.

Re: History is the key to understanding.

Dear Mr. Riley,

As a Chinese person, I am highly disappointed... Oh what the heck, this is a blog. Let's let loose the wolves.

Hey Riley,

You know what, we don't need you or Rhine's freakin' idea of oh so mighty patent "ideas" and "systems" from the godly America and Western "developed" world. Guess what? If you haven't realized from my earlier comment, Rhine's and your idea of patents are a big farce in China and we are all laughing at you clowns. You SERIOUSLY think that we'll come to "understand" you and your oh so capitalist dysfunctional copyright system and "improve" our court system? Guess again.

Funny thing that you mentioned history is the key to understanding, because YOU obviously don't understand history. If you do, you'll realize that innovations and competitions are slowly grinding to a halt in the western worlds while lawsuits between companies raise due to your almighty idea of patents and copyrights. I guess the fact that patent trolls exists doesn't raise your alarm on how badly the system is breaking down.

And guess what, in China we are having an explosion of innovations and inventions. Granted that probably most of them are copycats and only some of them are truly improvement of original idea or new innovations. However, we have more, and we don't have all those silly lawsuits tying up the court system, wasting resources. You guys over on this end of earth and go ahead and drool at those innovations and try to stop us with your almighty "patent" system. We are just going to view it as an "attack" from a "western world" trying to "stop innovations in China". We'll just take your advice, put it through the shredder while trying to contain our laughs while our court system slaps your asses with your rule and our interpretation. If you haven't realized, you ain't playing on your home turf anymore.

On a more friendly note, history will also tell you that China and Chinese people don't take other country's "interference" very kindly. If you have any hope of trying to sell your idea, try not to act so superior eh? Trust me, we understand very well how crappy your copyright/patent system is and we are choosing to ignore it. Before you can come up with something better, expect things to get worse for you (in your eyes only, we are have a grand time). If you can't sell something to a smart person, it's not because the guy is dumb. It's because your product is SHIT and the customer understand oh so very well.

BTW, one last advice. If you don't like how it works in China, you and your buddies can get the F**K out. It's our country, not yours. If you don't like it, you can leave. BTW, we have no shortage of people with investments willing to play the game with our rule.

Re: Re: History is the key to understanding.

While I agree with most of what you're writing, to be fair, China has some serious civil and social issues to work out before you can really say things carte blanche like:

"we are have a grand time"

or

"China we are having an explosion of innovations and inventions"

In Red China those things MUST come with certain caveats. Not that China's government is neessarily wrong; communism could be a legitimate form of sovereign rule (assuming that is how a majority of citizens wish to be governed), but even in a communist nation there should be some concept of basic human rights. The most powerful thing China could do to cement their place as the world's newest, and perhaps greatest, superpower would be a blanket improvement in living standards of its citizenry.

If it did that, you would see people begin to look to China for leadership tomorrow the way they did the United States pre-WWII.

Re: Re: Re: History is the key to understanding.

I agree that this is one of the biggest problems in China right now. The quoted sentences are really used in a spirit of... being all tongue and cheek. ;)

The problem with Chinese government is that they are very protective to their rule and very resistant to outside ideas. Before you could pressure them a bit more but now since the government's got more money and quite a bit of world economy is depending on China, it's getting harder to push them to do something.

It's tough to rule that many people, let along that many poor people. Because of the seclusion for so many years, the country is poor. Currently the wealthy and the poor are very unbalanced. It might be hard for Westerners to understand but under the hood of all that money and glory, it’s really a very sensitive bomb that could explode anytime. It’s not a coincidence that collisions between people and police and riots seems to increase in the last few years. Long term poverty coupled with envy could cause major social unrest over night if something is triggered. That’s why Chinese government keep on stressing their policy is “harmony” and is always clamping down on speech and freedom. I am not defending what China is doing right now is right, but honestly you can’t expect a country to completely go free suddenly. (and perhaps China's free is a different free that what everyone else thinks?)

I believe one of the biggest problem that US and all the developed nation keep on overlooking is that “Freedom” is a novel concept for people who don’t have it. You can’t just suddenly become free, like throwing someone who doesn’t know how to swim into a swimming pool. It’s actually a skill that you learn and get educated on. Look at what the US did in the last couple year, trying to “free” people. After the initial excitement, people start to become confused about “freedom”. What do we do with it? How should we approach this sudden freedom? Follow all these unanswered, poorly handled questions are basically chaos… or a slow slip into chaos, once again.

What I am basically saying is that, China does have its problems… LOTS of problems. However, they are not unique problems but common problems that almost all nations go through from developing to developed nation. What we need to do is to gently prompt China to go into the right direction without being to forceful. I think in a way Bill Clinton does a pretty good job in this (and Bush did a TERRIBLE job).

China has the potential, and we need to gently help it reach that potential.